"People in Australia and their customers I think are doing it tough," he told reporters in Sydney on Thursday.

"They have to justify in this environment, when people are really feeling it, why they believe they need to clip that ticket a little harder."

Mr Morrison encouraged unhappy customers to vote with their feet, saying competition is important to a strong and accountable banking system.

"If you don't like what Westpac's done, go to another bank," the prime minister said.

Westpac announced on Wednesday its variable home loan rates would go up from September 19, due to its wholesale funding costs rising.

The Reserve Bank of Australia has kept the official cash rate at a record low 1.50 per cent since 2016 and signalled a steady path for some time.

Westpac's rate for owner-occupier properties will increase to 5.38 per cent per annum for customers with principal and interest repayments, while the rate for residential investment properties will go up to 5.93 per cent.

That would add $35 to the monthly interest cost of an average mortgage of $300,000, the bank said.

Shadow treasurer Chris Bowen has also called on Westpac to justify the decision to its customers.

"Australians are already doing it tough with cost of living pressures, mainly rising power prices and private health insurance cost, and this won't help," he told AAP on Wednesday.